Cloud Native Quiz:

How many of these organizations have you heard of?

How many of the categories do you understand well?

For how many organizations are you able to describe what they sell in a single tweet?

When these cloud native businesses create open source software ate the associated costs capitalized or expensed?

Is the open source software created by these cloud native organizations included in GDP? Hint: No.
"Accounting regulators (GAAP) consider internally-generated intangibles as regular expenses, like salaries or interest expenses, whereas tangibles are considered assets. So, corporate balance sheets proudly exhibit industrial age buildings and machines"…
"Consider the accounting absurdity: the major value creators of modern businesses, like R&D, brands, or IT, are treated expenses, whereas the “commoditized” tangible (fixed) assets―marginal value creators available to all competitors― are capitalized."…
"A firm investing heavily in R&D, IT, brands, or business processes (e.g., customer recommendation algorithms), may appear to be an overvalued [since it isn't capitalized] ... whereas in reality its valuation isn’t excessively high"…
TOP SECRET: please don't tell anyone!

The failure of accounting to capture how value is created is a source investing edge. You can turn investor (and media) obsession with "earnings" into investing advantage if you understand important assets that aren't being capitalized.
WARNING⚠️ - Investing based on approaches that do not involve grabbing a P/E ratio from one of many websites available to anyone anywhere, requires that you do actual work to understand the actual business of the company. It is exactly what people do in job at a real company tho.

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More from @trengriffin

26 Sep
Twitter is the Quibi of reading --

except that Twitter doesn't pay its writers anything and it actually owns the content -- so Twitter has a workable business model.
One thing Twitter does for its writers, even though it pays them nothing, is give them a chance to be treated like a criminal if they suggest they be assigned a blue check mark. Someone received one without a request this week since they were quoted six times in the press though.
Quibi should fund a comedy about a platform business that pays for content.

High gross margin from free content enables more spending on the platform and opportunity to adopt an advertising based model, which is easier to bootstrap than subscriptions, but a tough revenue model.
Read 4 tweets
26 Sep
Someone I greatly admire sent me the galley proofs of their soon to be published book. I can't decide what is greater: the honor of being asked to read the manuscript or my happiness when I started reading it tonight. No, I can't tell you the topic or author. But it is fabulous.
I read the galleys of this excellent book end-to-end without stopping except for a dinner break. I'm thinking about ideas in the book this morning. More writing should be like this book.

The total number of books sold about investing or business is a small part of nonfiction.
This article title makes an important point about how early success compounds in book publishing and other businesses.

"There are a few winners and there are far, far fewer books around the break-even point, and there are more that lose."…
Read 4 tweets
23 Sep
1/ Casey Newton's interview with Sarah Jeong puts the focus on the economics of the *writers*. Too often people talk and write about whether the publication has a business model. What are the economics for the people who do the writing? How do they thrive?…
2/ Casey Newton: "What we don’t know is if you’re a writer with a following, can you use that to build a sustainable career in journalism?" That includes working for the NYT but also building a business around a platform like Substack or like rolling your own (Stratechery).
3/ Casey: "If you can find 10,000 people to pay you $100 a year, you’re making $1M a year. I’m not going to get to 10,000 subscribers anytime soon, but if I can I’ll be in a position where I can create media jobs." More and more journalists will adopt Casey's approach over time.
Read 15 tweets
20 Sep
1/ When Bill Gates Sr. achieved his 90 year milestone a book of stories written by his colleagues over the years was created for the birthday party entitled "Thanks for Showing Up In My Life."

I have been re-reading that book this week. It's a wonderful thing to have right now.
2/ Bill Gates (Trey) would not make publicly known that his father had Alzheimer's for another three years, but his close friends knew that Bill Sr. was struggling.

One way I connected with him was to tell memorable stories from the past since long term memory is less impacted.
3/ One story I told happened when the UW Law School Building was dedicated in his name. Bill Sr. said:

"There are many people in this room who deserve to have this building named for them more than me, but I accept this honor as a reflection of a son's love for his father."
Read 5 tweets
20 Sep
1/ Compare: "What stands out most in Nikkei teardown of the Model 3 is Tesla's integrated central control unit, or ‘full self-driving computer.” Tesla developed the chips on its own, along with special software designed to complement the hardware."…
2/ "Nikola is relying on Californian manufacturer Romeo Power Technology for batteries for one of its prototype electric trucks. The use of an established industry supplier is the second example of the start-up outsourcing a key technology."…
3/ "competitive forces will drive returns down to the cost of capital over time. If a company earns above market required returns, it will attract competitors that will accept lower returns, eventually driving industry returns lower." Michael Mauboussin…
Read 5 tweets
19 Sep
1/ Tracfone was able to prosper in a world where so many US MVNOs failed because: (1) it has unique distribution in a hard to reach part of the market; and (2) it played multiple network suppliers off each other to make a wholesale transfer price workable.…
2/ Verizon is already the network provider for 13 of 21 million Tracfone customers.

Revenues from Tracfone decreased 8.3% year but ARPU rose 2.4% year over year to $24, while the churn rate was 4.6%. Prepaid for value customers is a hard business with low CAC a critical factor.
3/ For reseller like Tracfone with $24 ARPU and 4.6% churn a month, you can solve for what the combination of gross margin and CAC must be to produce an acceptable financial return. Getting sales with a Tracfone on a hook at a drugstore or small grocery is part of low CAC.
Read 5 tweets

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